Another successful veil piercing against non-U.S. national for U.S. judgment

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We have posted recently on the New York law on piercing the corporate veil, since New York law continues to be the central law one sees in international litigations in the U.S., and veil piercing could be expected to be a particularly challenging and important issue in connection with non-U.S. nationals or entities.  See for example, our discussion of false conflicts in the context of a veil piercing proceeding, and our treatment of whether veil piercing was the correct procedure to enforce an arbitral award (it was, but the claim lost on the merits).

In another ruling, the Southern District of New York decided the case styled Ridge Clearing & Outsourcing Solutions, Inc. v. Khashoggi, 07 Civ. 6611(RJH)(S.D.N.Y. 2011), the Court articulated and applied New York’s veil piercing against Adnan Khashoggi, a national of the Kingdom of Saudi Arabia, in the context of claims for stock purchase and delivery transactions gone awry.  The decision is post-trial; the plaintiffs in the case evidently understood that the chances of an appellate reversal were diminished insofar as the District Court made post-trial findings of fact and conclusions of law, rather than rulings on summary judgment.

The entity at issue is Ultimate Holdings, Inc., formed by one Ramy El-Batrawi.  The proof at trial was that El-Batrawi formed the entity for the purpose of conducting business for Khashoggi.  El-Batrawi did not contribute any capital to Ultimate, and even though Khashoggi did not appear to pay any role in capitalizing the corporation either, the District Court found that the purpose of the company was to make money for Khashoggi.  Ultimately Khashoggi owned the entity and “had the right to direct its activities”, even though Khashoggi made a broad delegation of power to El-Batrawi...

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